The Macroeconomic Consequences of Wage Indexation Revisited

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The Macroeconomic Consequences of Wage Indexation Revisited

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Esteban Jadresic

Abstract

Since the mid 1970s, there has been considerable research on the macroeconomic consequences of wage indexation. Nonetheless, until recently, this research had not explored explicitly the implications of contracts that index wages to lagged inflation, the usual type of wage indexation observed in practice. Drawing mainly on recent research by the author, this paper examines the consequences of wage indexation to lagged inflation on aggregate wage formation, the cost of disinflation under money - and exchange-rate-based stabilization, the variability of output under alternative shocks and policy regimes, the choice of exchange rate regime, and the level and variability of inflation.

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 35.

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Date of creation: Apr 1998
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Handle: RePEc:chb:bcchwp:35

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Other versions:
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Other versions:
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Other versions:
- Robert P. Flood & Nancy Peregrim Marion, 1980. "The Transmission of Disturbances under Alternative Exchange-Rate Regimeswith Optimal Indexing," NBER Working Papers 0500, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Gerald Stuber, 2001. "Implications of Uncertainty about Long-Run Inflation and the Price Level," Working Papers 01-16, Bank of Canada. [Downloadable!]

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